Aarons 2014 Annual Report Download - page 78

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The 2014 note purchase agreements contain financial maintenance covenants, negative covenants regarding the Company’s
other indebtedness, its guarantees and investments, and other customary covenants substantially similar to the covenants in the
Company’s 2011 note purchase agreement, revolving credit and term loan agreement and franchisee loan program, as modified
by the amendments described herein. The Company used the net proceeds of the sale of the senior unsecured notes to the
purchasers to partially pay for the Progressive acquisition.
On December 9, 2014, the Company entered into the fourth amendment to the 2011 note purchase agreement and the first
amendment to the 2014 note purchase agreements to, among other things, conform the financial covenants and certain other
covenants, terms and provisions to substantially reflect the same changes made to comparable covenants, terms and provisions
in the franchisee loan program and in the revolving credit and term loan agreement, as modified by the amendments described
herein. The Company remains subject to financial covenants under the 2011 note purchase agreement and the 2014 note
purchase agreements, including maintaining a ratio of debt to earnings before interest, taxes, depreciation and amortization and
a minimum fixed charge coverage ratio.
Capital Leases with Related Parties
As of December 31, 2014, the Company had 19 capital leases with a limited liability company (“LLC”) controlled by a group
of executives, including a former Chairman of the Company. In October and November 2004, the Company sold 11 properties,
including leasehold improvements, to the LLC. The LLC obtained borrowings collateralized by the land and buildings totaling
$6.8 million. The Company occupies the land and buildings collateralizing the borrowings under a 15-year term lease, with a
five-year renewal at the Company’s option, at an aggregate annual rental of $788,000. The transaction has been accounted for
as a financing in the accompanying consolidated financial statements. The rate of interest implicit in the leases is approximately
9.7%. Accordingly, the land and buildings, associated depreciation expense and lease obligations are recorded in the Company’s
consolidated financial statements. No gain or loss was recognized in this transaction.
In December 2002, the Company sold ten properties, including leasehold improvements, to the LLC. The LLC obtained
borrowings collateralized by the land and buildings totaling $5.0 million. The Company occupies the land and buildings
collateralizing the borrowings under a 15-year term lease at an aggregate annual rental of approximately $1.2 million. The
transaction has been accounted for as a financing in the accompanying consolidated financial statements. The rate of interest
implicit in the leases is approximately 10.1%. Accordingly, the land and buildings, associated depreciation expense and lease
obligations are recorded in the Company’s consolidated financial statements. No gain or loss was recognized in this transaction.
Sale-leasebacks
The Company finances a portion of store expansion through sale-leaseback transactions. The properties are generally sold at net
book value and the resulting leases qualify and are accounted for as operating leases. The Company does not have any retained
or contingent interests in the stores nor does the Company provide any guarantees, other than a corporate level guarantee of
lease payments, in connection with the sale-leasebacks.
Other Debt
Other debt at December 31, 2014 and 2013 includes $3.3 million of industrial development corporation revenue bonds. The
weighted-average interest rate on the outstanding bonds was .24% and .25% as of December 31, 2014 and 2013, respectively.
No principal payments are due on the bonds until maturity in October 2015.
Future maturities under the Company’s debt and capital lease obligations are as follows:
(In Thousands)
2015 $ 112,597
2016 40,207
2017 100,140
2018 98,857
2019 133,190
Thereafter 121,091
$ 606,082